Lift off at Norwegian Air after it cuts capacity by a quarter

Norwegian Air cut its capacity by a quarter in December, removing loss-making routes as it made headway on its plan to regain profitability, traffic data from the budget carrier shows.

Shares in the carrier jumped as much as 6 per cent in opening trade on Tuesday as Norwegian said reduced capacity helped lift average income per passenger by 14 per cent.

The airline has shaken up the transatlantic travel market with low fares, but breakneck expansion and the forced grounding of its Boeing 737 Max fleet also brought mounting debts and losses.

Norwegian has raised funds from investors three times in 20 months to prevent it from joining the ranks of airlines that have collapsed due to industry overcapacity.

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The airline’s overall capacity, a measure of distance flown and the number of seats available, fell 25 per cent year on year in December, while analysts in a Reuters poll had on average expected a 24 per cent drop.

But the airline’s yield – income per passenger carried and kilometre flown – rose 14 per cent.

“Stellar December traffic figures – stock to move up,” Danske Bank analyst Martin Stenshall wrote in a note to clients.

Its shares have tumbled 60 per cent in the last year but have risen 19 per cent in the last three months as the turnaround plan gained traction.

Routes between Ireland and the United States and Canada were cut from Norwegian’s schedule last September, and last month the company also announced the sale of its domestic business in Argentina to JetSmart Airlines.

Norwegian on average filled 83.5 per cent of seats in December, up from a load factor of 78.6 per cent in the final month of 2018 and beating an average forecast of 82.4 per cent. – Reuters